Give us that gambling revenue

SWEET, SWEET REVENUE: Monday was full of good news for states always worried about how to balance the budget, as the Supreme Court basically paved the way for states to decide whether to allow legalized sports betting.

So who’s taking advantage? “The ruling will open the floodgates to an industry long the domain of barroom bookies and Las Vegas gambling parlors. In New Jersey and Delaware, the first bets could be placed within days or weeks, and Mississippi could follow within a month or two. In total, about 20 states have either enacted laws or introduced bills to legalize sports betting, all in anticipation of this moment,” our Ryan Hutchins and Josh Gerstein wrote. Nevada has long allowed legalized sports gambling, while Delaware, Montana and Oregon were allowed sports lotteries under the 1992 federal law struck down on Monday.

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So how much new revenue? The short answer, Richard Auxier of the Urban-Brookings Tax Policy Center told Morning Tax in an email, is “not much. But, critically, still something!”

The National Conference of State Legislatures praised the move for allowing “states another tool with which they can continue to craft smart, tailored policies during a time of congressional gridlock in Washington.” But it’s also probably easy to overstate the amount of breathing room that gambling revenue would bring the states. Oxford Economics projected that legalized sports betting would provide states an extra $3.4 billion a year in revenue, in a study commissioned by the American Gaming Association. Auxier noted that states currently bring in more than $900 billion a year in taxes. So if that Oxford Economics projection is true, the gambling revenue would provide well under 1 percent of states’ total tax take. (Remember that marijuana provided about 1.2 percent of taxes in Washington and a full 2 percent in Colorado, according to a recent study.)

Still something: Gov. Phil Murphy and legislative leaders in New Jersey, which played a key role in the case that swept away the restrictions on sports betting, are hustling to get a gambling law into place, Ryan also reported. The governor and the legislature are currently sparring over other tax measures, but one gambling proposal would dedicate most of the revenue from sports betting to programs for seniors or the disabled. “The state treasurer's office said it had not scored how much revenue sports betting could produce for the next fiscal year and didn't plan to do so until it had a final bill. An administration official, however, said it was clear there wouldn't be enough money to replace the governor's big tax proposals calling for a restoration of the sales tax to 7 percent and higher income tax rate for millionaires,” Ryan writes.

TUESDAY’S HERE, and Morning Tax is having so much fun watching 32 other countries roll out their rosters for the World Cup next month. Go, go USA.

Today also marks 201 years since America’s first private mental hospital opened its doors – Philadelphia’s Friends Hospital, originally called the Friends Asylum for the Relief of Persons Deprived of the Use of Their Reason.

A CLEAN SWEEP: The Seattle City Council voted unanimously on Monday to implement a “head tax” on larger companies, after a weekend of negotiations led to a slimmer version, The Seattle Times reports. Businesses that gross at least $20 million in the city will now get charged $275 an employee starting in 2019 as part of the tax meant to help the city reduce homelessness and create more affordable housing, almost half the $500 the city was originally contemplating. The council estimates that around 3 percent of the city's businesses will get hit by the tax, which will raise around $45 million a year and come back before the council again in five years.

More out of Seattle: Amazon isn’t too happy with the skinnier head tax, either. But The Seattle Times notes that about a quarter of the company’s white-collar workforce is already outside the city, even before HQ2 is awarded, and in research and development hubs around North America. The Times also breaks down the 585 companies projected to be subject to the tax, which include 99 wholesalers, 87 professional services companies, 78 construction firms and 77 retailers.

FOR EVERY ACTION…: Republicans are still trying to make their tax cut a political winner for them this fall, even as Democrats deride it as a handout to the wealthiest. So maybe it’s fitting that, as CNN reports, a collection of super-rich hedge fund executives are telling the GOP’s House and Senate campaign committees to shove off because they don’t like the tax law. “Collectively, they have bristled at what they view as favored treatment for corporations under the law. While the corporate tax rate was slashed from 35% to 21%, hedge funds are largely taxed at the top individual rate, which ticked down from 39.6% to 37%.”

WHAT SAY YOU, ECONOMIST…: The magazine has responded to recent pushback from Sen. Marco Rubio (R-Fla.), who said the Economist didn’t put enough context around his criticisms of the GOP tax cut in a recent interview. On one level, the Economist notes, Rubio’s right to say that much of the news media failed to note his overall support of the tax cut or that he’s long been open about ways he thought it could have been improved. "But, in a way, this was justified," the magazine added. "The Trump administration’s claim that companies would pass a lot of benefit from the tax cut to their workers was, and remains, one of its biggest boasts for the tax cut. Specifically, it predicted the “average American family” would see a wage hike of $4,000. Mr Rubio’s scathing corrective to that misleading, or bogus, claim was in a sense more important than his own nuanced view of the tax reform."

ON THE DOWNSWING: The number of Americans renouncing their citizenship took a slight tumble in 2017, the first decline in five years. It was only a slight decrease, from 5,411 in 2016 to 5,133 last year, and the 2017 renunciations still far outpace the number from 2015. And as Robert Wood writes at Forbes, the reasons that citizens are becoming former citizens are pretty much the same, including the strains caused by the Foreign Account Tax Compliance Act.

INTERNATIONAL UPDATE

COUNT IT UP: Taxing financial transactions across 10 European countries could raise some $23.6 billion (19.6 billion euros) a year, Bloomberg reports. More than half that revenue would come from taxing derivatives, but there is a catch. "Those totals assume that the tax could be collected abroad, including in the U.K. after Brexit, on transactions involving a counterparty from one of the participating countries. Talks on the financial-transaction tax were put on hold last September to allow experts to work through the possible consequences of the withdrawal of Britain, home to the EU’s main financial hub, from the bloc."

ON A KNIFE’S EDGE: There’s a lot of people wondering how things will go if Malaysia follows through and gets rid of a goods-and-services tax within the first 100 days of the tenure of the new and former 92-year old prime minister, Mahathir Mohamad. As Bloomberg notes, Mohamad and other GST critics say it has hiked the cost of living and that a more limited tax would give Malaysia the revenue it needs. “Supporters of the goods-and-services tax point to how much more income it gave the government than the previous system, helping to underpin Malaysia’s credit rating and its reputation with foreign investors.”

STATE NEWS

IN AND OUT: The Indiana legislature had a controversial one-day special session on Monday, in which a measure bringing the state’s tax system in line with the federal code was among the bills passed. Among the big winners from that legislation, The Indianapolis Star reported, were Eli Lilly of big pharma and hot mix asphalt plants.

NOT LOOKING GOOD: It’s looking increasingly unlikely that new tax cuts will make it into laws this year in Missouri, after a barebones proposal fell flat in the state Senate on Monday, the St. Louis Post-Dispatch reports. Gov. Eric Greitens has run into legal trouble this year, but has still tried to help muscle through some $800 million in tax cuts. But the measure that the Senate took up Monday, which would cut the individual income tax rate from 5.9 percent to 5.5 percent, was shaved from 400 pages to 11 pages.

HOW’D THAT GET THERE: Mayor Mitch Landrieu of New Orleans has been accused of funneling property tax revenues meant for local priorities to the Louisiana pension system, The Advocate reports. That would be an improper use of that revenue, according to the state Supreme Court, though New Orleans gave as much as $4.2 million in property taxes to state retirement funds. The city’s downtown development district has demanded repayment of funds that didn’t go to initiatives like better sidewalks, security and homeless shelters. “However, the improper withholdings may go well beyond the money due to the DDD, said Bill Aaron, the agency's lawyer," per the New Orleans Advocate.

About The Author

Bernie Becker is a tax reporter for POLITICO Pro, where he is primarily responsible for writing the Morning Tax tipsheet.

He previously covered taxes for The Hill, and was an editorial assistant for The New York Times in Washington.

A native of Martinsville, Va., Becker has degrees from the College of William and Mary and the University of Maryland. He now lives in Northwest D.C. with his wife and young daughter. His hobbies include running, reading history books, eating spicy food and watching his daughter chase his cat.